How Appeal Courts Look at Contract Termination for Default Cases

When a federal government agency terminates your contract for default (T4D), the next steps and whether you have a good chance of appealing the contracting officer’s final decision can be challenging. 

Although the decision has been made to terminate the contract for default, knowing how the appeal courts look at contract termination for default cases can help you make a decision on what to do next.

Appeal Court’s Review of Contract Termination for Default Cases

When the appellate court reviews  termination for default cases, it looks to “strike a balance between the judicial aversion to default terminations . . . and the fact that contracting agency, as a party to the contract is allowed to the benefit of its bargain. 

When you challenge a termination for default, it is the government that bears the legal burden to establish that the decision was legal justified.  Courts look at default terminations as a drastic measure. Therefore, they look at the facts of every case.

The default termination should not be your fault. The facts leading up to the termination for default should not be directly due to the government’s actions, or failure to act. 

For example, if an agency is direct control of another contractor, and that contractor is responsible for delaying the progress, the agency should not default your contract simply because the other contractor’s actions ultimately led to your delay on the project.

When appeal courts look at contract termination for default cases, if the contracting officer alleges that the decision was based upon your failure to perform the work, courts require the government to establish that there was “a reasonable belief on the part of the contracting officer that there was ‘no reasonable likelihood that the [contractor] could perform the entire contract effort within the time remaining for contract performance.’” See Lisbon, 828 F.2d at 765 (quoting RFI Shield-Rooms, ASBCA Nos. 17374, 17991, 77-2 BCA (CCH) ¶ 12,714, 61,735) (citing Discount Co. v. United States, 554 F.2d 435, 441 (Ct. Cl. 1977), cert. denied, 434 U.S. 938 (1977)).

When the government meets its burden, there is still a chance to prevail on appeal.  Termination for default cases can be converted to a termination for convenience only if the delay was “excusable” under the terms of the default provision of the contract. See Sauer Inc. v. Sec’y of the Navy, 224 F.3d 1340, 1345 (Fed. Cir. 2000).

Your failure to perform will also be excused and the termination for default converted to a termination for convenience if you can show that that the government materially breached the contract. See Murdock Mach. & Engineering Co. of Utah v. United States, 873 F.2d 1410, 1413 (Fed. Cir. 1989) (citing Malone v. United States, 849 F.2d 1441, 1446 (Fed. Cir. 1988)).

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When appeal courts look at contract termination for default cases, there are several legal hurdles that you must overcome. If you are seeking advice from legal counsel or need to make a decision whether or not to appeal the contracting officer’s decision, call our FAR termination for default lawyers at 1-866-601-5518 for a FREE INITIAL CONSULTATION.